TaxTMI Login
Just a moment...
Press 'Enter' to add multiple search terms. Rules for Better Search
When case Id is present, search is done only for this
of 
of 
No Folders have been created
Are you sure you want to delete "My most important" ?
NOTE:
of of 
All Case Laws
of of All Case Laws
Note
Bookmark
Share
Don't have an account? Register Here
of <h1>Tribunal denies deduction for lease rentals as revenue expenditure, citing hire purchase arrangement.</h1> <h3>M/s Mahashakthi Construction Co., Versus The Joint Commissioner of Income-tax, Special Range,</h3> The Tribunal dismissed the assessee's appeal, affirming the disallowance of lease rentals as revenue expenditure for the relevant assessment year. The ... - Issues involved: Determination of allowability of lease rental income and characterization of transactions of loans as a colorable device.Issue 1: Allowability of lease rental incomeThe assessee, a partnership firm, claimed lease rental expenses paid to its sister concern for machineries used in contract work. The AO disallowed the deduction, considering the lease agreements as hire purchase agreements due to lease rentals exceeding the cost of acquisition. The AO relied on the judgment of McDowell & Co. Vs CTO to lift the colorable veil. The CIT(A) and Tribunal upheld the AO's decision, emphasizing the excessive lease rentals and lack of evidence regarding inability to make down payment for machinery acquisition.Issue 2: Characterization of transactions as a colorable deviceThe assessee contended that the CIT(A) exceeded jurisdiction by not following the Tribunal's directions to verify if rent income was shown in the sister concern's tax proceedings. The Tribunal remanded the issue to the CIT(A) for reconsideration, but the CIT(A) confirmed the disallowance. The Tribunal clarified that its observation did not constitute a finding and directed the CIT(A) to decide the matter afresh. The authorities concluded that the transactions were a hire purchase agreement disguised as lease, as the machinery remained the lessor's property and lease rentals exceeded acquisition costs.In conclusion, the Tribunal dismissed the assessee's appeal, affirming the disallowance of lease rentals as revenue expenditure for the relevant assessment year. The Tribunal emphasized that each year is independent in income tax proceedings, and the excessive lease rentals indicated a hire purchase arrangement. The decision highlighted that the sister concern's treatment of lease rentals as income did not justify their allowance as expenses for the assessee.
TaxTMI 
TaxTMI 
